Buydowns vs. Price Reductions: Which Saves Buyers More?

Blog posted On August 29, 2025

In the current housing market, savvy home buyers are saving money in clever ways, such as temporary buydowns and price reductions. However, what if there was a third option that could help you save even more money down the line? Let’s examine the pros and cons of buydowns and price reductions in comparison to our innovative program, List & Lock™.

What’s the Deal with Price Reductions?

Out of these three options, a price reduction on the property’s purchase price is the least desirable choice. While it might bring more buyers to the table, it can be negative in three ways: 1) it reduces the seller’s net proceeds, 2) it really doesn’t make a significant impact on the buyer’s new mortgage payment, and 3) it potentially sends the wrong signal to buyers that there’s something wrong with the property.

When comparing the numbers between these three choices, turning to discounted rate programs and buydowns can be much more economical. Using the funds from seller credits to temporarily lower the interest rate (in the case of temporary buydowns) will likely have a far bigger impact on boosting home affordability and reducing that monthly mortgage payment.

Temporary Mortgage Payment Buydowns: Are They Worth It?

Temporary buydowns are absolutely worth it, especially in comparison to price reductions. Using seller credits to reduce the buyer’s interest rate is more effective than a reduction, even potentially eliminating private mortgage insurance for them as well.

Here’s a refresher on the different types of temporary buydowns available, taken from our New Build Boom piece from July:

• 1-0 Buydown: The monthly payment will be discounted for the first year of your loan and then will revert back to the note rate in the second year
  • For example, if your note rate is 6.5%, your monthly payment will be based on a rate of 5.5% for the first year
• 2-1 Buydown: The monthly payment will be discounted for the first two years of your loan and then will revert back to the note rate in the third year
  • For example, if your note rate is 6.5%, your monthly payment will be based on a rate of 4.5% for the first year and 5.5% in the second year
• 3-2-1 Buydown: Following the same pattern, the monthly payment will be discounted for the first three years of your loan and then will revert back to the note rate in the fourth year. This buydown option offers the most significant reduction
  • For example, if your note rate is 6.5%, your monthly payment will be based on a rate of 3.5% for the first year, 4.5% in the second year, and 5.5% in the third year

What About a Third Option…List & Lock?

It’s a great time for sellers to use our List & Lock program since houses have been sitting on the market longer and may need a leg up; this unique product can help attract buyer interest to flagging listings. We’ve calculated and compared this method to both price reductions and temporary buydowns, and List & Lock comes out on top as being the most cost-effective option for both buyers and sellers.

How It Works

1. Sellers secure a List & Lock that allows them to advertise a discounted rate on their listing
2. We contribute an extra 1% to lowering the rate, on us
3. Sellers receive custom marketing material advertising discounted rates
4. The material will include a QR code that leads to a landing page with up-to-date rates
5. Once they’ve found a qualified buyer, the rate will be locked

With the List & Lock method, sellers can contribute up to 6% towards lowering the rate, which is then combined with the 1% contribution from us. As a final added bonus, sellers who utilize our List & Lock program will receive a credit up to $5,000 on their next purchase with us.* It’s a win-win for both buyers and sellers as it provides a discounted rate for the buyer, adds incentives for the sellers, and typically saves more money than a price reduction or a rate buydown.

Mortgage Tip: You can enhance your savings even further if you take advantage of our Rate Rebound program, which allows you to refinance with waived lender fees if rates drop within five years of your purchase.** Don’t just save money now — set up your savings for the future!

Ready to Maximize Your Mortgage Savings?

After assessing these three home loan strategies, we hope you feel confident to move forward in your homeownership journey and take the next step. If you want to learn more about our List & Lock or Rate Rebound products, we’re happy to hop on the phone with you.

Source: U.S. News, Investopedia

*Home Seller has 1 year to execute the List & Lock & Save. The 1-year countdown starts either from date the loan funds on the List & Lock property or the lock expiration date (whichever is sooner). Only one List & Lock & Save transaction per List & Lock use. Not available on the All In One Loan, HELOCs, Bond/HFA loans, Brokered loans, Regional investor loans, Construction loans or 2nd liens. Cannot be combined with a lender credit or other credit program.

**CMG Home Loans will cover all customary lender fees which are lender administrative fees, tax service fees, appraisal fee and credit report fee. This offer does not cover discount points. Credit cannot exceed total fees. Rate Rebound is only valid on future conventional conforming, government, and jumbo loans in our retail channel (future Construction Loans, All in One, HELOCs, Bond, or HFA loans are excluded). Rate Rebound is only available on loans originated by CMG Home Loans. There may be additional restrictions based on investor. Offer may not be redeemed for cash or credit and is nontransferable. Offer cannot be retroactively applied to any loans. Offer may not be used with any other discounts, promotions, or interest-only/buy-down and second-lien products. This offer is subject to changes or cancellation at any time at the sole discretion of CMG Home Loans. Additional restrictions/conditions may apply. This is not a commitment to lend and is contingent on qualification per full underwriting guidelines. Program will be available on loans disclosed on or after 11/1/22. Program is applicable for refinances 6 months after closing up to 5 years from original note date and with a net tangible benefit which includes a rate reduction of 0.5%, going from an ARM to fixed rate, reducing loan term, movement to a more stable product, or a lower principal and interest payment. By refinancing the existing loan, the total finance charges may be higher over the life of the loan.